Go to Jeff Salisbury LWGate Home Page.From: Douglas Gerlach <gerlach@investorama.com>
Subject: SPDRs
Date: Thu, 28 Jan 1999 20:29:48 -0500
Previous Article (by Date): Bid/Ask-type Questions Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson)
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>With that said, I am trying to better understand the mechanics of
>pricing SPDRs. They seem similar to closed-end funds but they don't
>trade with the expected premium or discount. That suggests they are not
>priced on supply/demand but rather directly valued to the underlying
>asset. They are exchange traded which suggests supply/demand pricing.
SPDRs are Unit Investment Trusts that hold the S&P 500. As a trust, they
never buy or sell securities, and each unit in the trust is priced at
1/10th of the value of the S&P 500 -- you're right, they're priced
according to the underlying asset. While it's possible that elements of
supply and demand could affect the price, the impact is negligible. The
advantages of SPDRs over an S&P 500 index fund are: there are no capital
gains distributed by SPDRs; the expense ratio charged by SPDRs is much less
than the most efficient index fund, about 0.1845%; and you can buy and sell
SPDRs on an intraday basis. The downside of SPDRs is that you have to pay
commissions to buy them, but the economies of a discount broker and the
lower expense ratio make this meaningless when you're investing any
substantial amount.
For more about SPDRs, check out this article on ArmchairMillionaire.com:
http://www.armchairmillionaire.com/features/spiders_0416.html
Invest-O-Rama!, http://www.investorama.com
Investment Club Central, http://www.iclubcentral.com
DRIP Central, http://www.dripcentral.com
Investor's Web Guide, http://www.investorama.com/guide
JUST PUBLISHED: Complete Idiot's Guide to Online Investing,
http://www.investorama.com/cig
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Previous Article (by Date): Bid/Ask-type Questions Jacqueline.D.Richardson@Hitchcock.ORG (Jacqueline D. Richardson)
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